CubaIndustria2018 aims to encourage foreign investment on the island

CubaIndustria2018 aims to encourage foreign investment on the islandHAVANA, June 23th    The Cuban government is hosting a fair this week to encourage foreign entrepreneurs to invest on public and private businesses on the island. About 130 companies from more than 30 countries have a presence at the CubaIndustria 2018.

Gabi and Sofi, a Varadero-based toy maker, had a booth and the cooperative’s president, Ariel Balmaseda, was there to talk about the beloved characters who inspired his products and the cooperative’s potential for growth.

“It is the most important event in the industry in Cuba,” Balmaseda said about the opportunities available to connect with investors and new business partners.

After the 1959 revolution, Cuba has remained a highly centralized, state-run economic system. Since the 300-point overhaul in 2011, Cuba has continued to change its economic model only slightly with a very small and controlled private sector.

With the U.S. economic embargo on Cuba, which was imposed in the early 1960s to cut off U.S. investment, the Cuban government has been pushing to raise its GDP with the help of billions of dollars in direct foreign investment from Europe, China and Russia.

“Foreign investment is important,” Balmaseda said adding that he was exploring opportunities to partner with a European company.

Some investors believe Cuba’s economic model and legal system needs to continue changing and as it stands they are mistrustful of the Cuban government and consider the risk of doing business with the Cuban government high.

During the presidency of Raul Castro, although Cuban officials focused on foreign direct investment to reach economic growth goals some foreign executives were jailed when his new administration moved to tackle corruption.

Prominent Canadian businessman Cy Tokmakjian spent three years in jail after he was convicted of bribery and was sentenced to 15 years in prison. He was able to return to Ontario in 2015.

In 2014, Cuba’s National Assembly passed a law offering foreign investors incentives for joint ventures with the Cuban state. Some of the perks included a tax cut from 30 to 15 percent, an initial 8-year tax exemption and ownership rights.

The change from former U.S. President Barack Obama’s defiance of the U.S. embargo to President Donald Trump’s tightening of the sanctions didn’t slow down foreign investment in tourism and energy with Cuba’s main trading partners Russia, China and Spain, according to Cuban officials.

Some of the adventurous foreign investors who have taken the risk to do business in Cuba say they have faced challenges adapting to the economic system and the collectivization of labor in Cuba.

Agusto Nicolau runs a plastics company out of Portugal. In terms of the island’s work force, Nicolau believes there is a need to offer workers more incentives and rewards. He is planning to set up shop in the special Mariel Special Development Zone, a business hub that is adjacent to a container terminal at the port of Mariel, just west of Havana.

“There have been some difficult moments and some better ones,” Nicolau said about adapting to doing business on the island. He remains hopeful.